Arbitration in the real estate sector

Arbitration in the real estate sectorImage Credit: Supplied

With the resurgence of the Dubai realty sector, the need for alternative dispute resolution (ADR) methods also seems to be growing. One of them is arbitration.

It emerged in early 2000s in the UAE when developers and landlords used to regularly add arbitration clauses. Since litigation soon proffered a better regulatory framework for the emirate, it became more active. But then again, the latter part of 2012 saw the launch of the Real Estate Arbitration and Reconciliation Centre in Dubai.

Arbitration is essentially a replication of the judicial process, but is more focused and modernized. It works well if the arbitrators are skilled and well-versed. The occasion of arbitration arises with the mutual agreement of the parties concerned, and if their sales and purchase agreements (SPAs) show such a clause. About 25% of SPAs, on average, have an arbitration clause. Nowadays, buyers are in a better position to request for an arbitration clause.

Arbitration is employed in case of disputes arising out of non-registration of contracts for the sale of an off-plan property, or claims to end the contract, or to change the consequences for non-performance like when a developer may be unsuccessful in fulfilling his duty to construct the property unit within the stipulated timeframe and so on.

This ADR method has several benefits. Arbitration provides flexibility, speed, efficiency, privacy and confidentiality in resolving real estate disputes. It is also economical for both property buyers and developers. For instance, a party needs to pay a fixed fee for each SPA at issue if they opt for litigation. If a party has three such SPAs, they have to pay triple the amount. However, in arbitration, a party can join all the claims into one deed. Additionally, arbitration doesn't require a local lawyer, and documents can be in English and not necessarily translated to Arabic as in the case of litigation.

For enforcing an arbitration award in Dubai, the victor gets the order for execution of arbitrium and pays the court fees in a Dubai court.

Handy Hints:

• With property resurgence, arbitration is gaining momentum

• It provides flexibility and efficiency in resolving real estate issues

• It resolves cases like non-registration of contracts, and others

Source: Arva Shikari, Special to Properties

The writer is a freelancer

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